Corporate Law 02. DIFFERENT TYPES OF COMPANY 1. Companies Limited by Shares Company limited by shares is the most important form of company. It is a company which keeps the liability of its member's limited up to the value of the shares purchased by them. It is essential for such companies to use the word limited at the end of their names so that the people know that the liability of its members is limited. Most of the industrial and commercial companies in Pakistan are registered as companies limited by shares. 2. Company Limited by Guarantee Tt means a company whose memorandum of association gives guarantee to contribute a specified amount of money at the time of winding up of company by the members It may be formed with or without share capital. Where a company is being wound-up, a member of such company may be called to contribute towards the asset of the company. 3. Unlimited Company ‘A company whose memorandum of association state that the liability of the members shall be unlimited or does not state the liability shall be limited to the extent specified therein is termed as an unlimited company. Following are some specified features of an unlimited company: a The liability of its members is uot limited. bAlthough the lability of the members is unlimited, but the creditors cannot be sued to members ¢.An unlimited company is not prohibited to give any loans, guarantee, security, financial assistance, etc., to any person for the purpose of purchase of its shares. 4. Public Company Public company means a company which is not a private company. It is a company whose: - Minimum number of members is seven but there is no restriction for maximum. ‘The word limited is used after the name of company. Shares of the company ean easily be sold and transferred The liability of the shareholder is limited to the value of shares purchased. Its essential to the company to issue prospectus. The audit of company’s account is compulsory every year. rppeapes 5, Listed Company ‘A public company, body corporate or any other entity whose securities are listed on Securities Exchange Commission of Pakistan (SECP) 6. Private Company A private company means a company which by its articles: a. Restricts the rights to transfer its shares, b. Limits the number of its members to 50, ¢. Prohibits any invitation to the public to subseribe for shares, or debentures or redeemable capital 7, Holding Company It is a company Which holds more than 50% shares of another company. The company may have the power to appoint more than 30% of directors of another company. 8, Subsidiary Company A company in which a holding company can: - a, Controls the composition of the board of directors and can remove or appoint all or majority of the directors. b._Exercise or control more than 50% of its voting securities JAMSHAID IFTIKHAR, M.Phil Commerce & FinanceCorporate Law 5 9. Single Member Company The SECP introduced the concept of Single Member Company in 2002. The objective of single member company is to provide an opportunity to single owner to enjoy the benefits of limited liability. There is only one shareholder in this company, The company uses the word (SMC Pvt. Ltd.) after its name. The single member is responsible for the management of the company. Shares are not transferable. The liability of the owner is limited. The issuance of prospectus is not necessary. The company has a separate legal entity fiom its member. The business life of company is long because legal representative can continue the business after his death. i. The company is not registered in the stock exchange. FRopanse 10. Wholly owned subsidiary A company shall be deemed to be a wholly owned subsidiary of another company, if all its shares are owned by the other company or s statutory body. 11. Govt. Company a. These companies are owned by the Provincial or Federal Governments, D. Atleast 51% shates are held by the goverument c. The Govt. is responsible for overall finetions and management of the company. 4. Example Sui Northern Gas Pipeline Limited 12, Foreign Company a. It is a company which is formed and registered outside Pakistan. b. The company’s registered office is outside Pakistan. ¢. The foreign owners of the company receive all the profits, d. It is compulsory for the company to submit all its accounts and reports to the registrar. 13. Modarba Company The company is formed under the Modarba Company's ordinance 1980. In this company one party contributes with capital and the other party with skills and experience. Modarba Company may be for definite or indefinite period 14, Statutory Company Statutory company means a company which is incorporated and regulated by a special Act of the Parliament or an Ordinance issued by the Head of the State. The objects, limitations, liabilities, jurisdictions and the procedure for conducting the day-to-day business of the company are specified in the concemed statute. Pakistan Railways, State Bank of Pakistan is the examples of Statutory ‘Company. JAMSHAID IFTIKHAR, M.Phil Commerce & Finance